Rabbitte insists banks, not State, must carry the can on loans crisis
FORMER Minister Pat Rabbitte has said the banks not the State should bear the primary responsibility to resolve the mortgage arrears crisis.
But he added that the Government must act soon or be confronted by a "an appalling social and political vista".
Mr Rabbitte warned that any attempt by Fine Gael to water down plans, led by former Labour Party cabinet Minister Willie Penrose, to reduce Ireland's bankruptcy term from three years to one, would cause serious political trouble.
Mr Rabbitte was speaking as a Government plan to ease the mortgage crisis by using taxpayers' money to bail out those in mortgage arrears has sparked a furious backlash.
The proposal to offer State support to homeowners who cannot afford to repay mortgages has been blasted by Fianna Fail finance spokesman Michael McGrath as "another bailout of the banks by responsible taxpayers".
A Labour Party Government spokesman last night said the Coalition is "nowhere near signing off" its package of measures.
The controversial idea is being considered as part of a series of measures in a package the Government is finalising to deal with the mortgage-arrears crisis.
Under the proposal, the Government would offer ongoing state support to homeowners who cannot afford to repay their debts in order to allow them to retain ownership of their properties.
Banks would have to agree to restructure the mortgage. In return they would receive a State top-up repayment. The proposal would effectively mean that heavily-indebted taxpayers, who are already repaying their full debts, would then have to bail out borrowers in arrears.
"The State has to be conscious of the many thousands of families who are meeting their mortgage repayments through great sacrifice," Mr McGrath said.
"Any scheme providing direct support would have to be very carefully constructed. Such a policy is letting the banks off the hook again, it is a direct transfer from the taxpayer to banks which have already been handsomely capitalised at the same taxpayer's expense," he added.
He said Fine Gael and Labour "need to learn" that resolving mortgage arrears is the banks' responsibility, not the taxpayers.